(This article contains figures that were current in the year of publication, 1990. Current funding minimums for whole body preservation and neuropreservation are higher now than they were then.)
Cryonics, August 1990
by Mike Darwin
(See accompanying TABLES)
NOTE: These views are my own, and do not necessarily reflect those of other Alcor Officers or Directors. Special thanks to Dave Pizer, Mike Perry, and Hugh Hixon, for assistance in gathering numerical data for inclusion in this article, and to Carlos Mondragon, for patiently explaining the concept of “the cost of money” — several times. — MD
Two of the most frequently asked questions about cryonics are “What does it cost?” and, “Why does it cost so much?” In 1982, Steve Bridge and I tried to address those issues in a two-part article entitled “The High Cost of Cryonics” (Cryonics (Jan-Feb, 1982)). I do not intend to cover ground already covered in the previous articles. Many of the issues discussed eight years ago are still issues today, although in some instances answers now appear to be closer. Certainly much has changed in eight years, and it seems fair to say that we are now much closer to understanding the basic costs of offering cryonics services, at least from the technical standpoint. The more complex issue of assessing the costs associated with staying in business from a legal and social standpoint are also somewhat clearer, but by no means as well understood as the more mundane costs associated with physically preparing a patient for suspension and caring for him thereafter.
This article will not be comprehensive and will not tackle all the issues that we dealt with in the 1982 article. I simply intend to lay out a rational, carefully documented basis for where Alcor’s minimum funding levels should be set for whole body suspension and for neurosuspension. I will also offer some discussion of the issues raised by these numbers, and some suggestions as to what the new minimums for suspension funding might be.
Clearly, the most basic determinant of what to charge for cryonic suspension is the marginal cost of doing one. In other words, what are the costs incurred by Alcor in carrying out a suspension? How much do things like transportation, perfusion supplies and services, cryogenic dewars, etc., actually cost Alcor? I’ll examine all of these issues closely, as well as the complex and difficult tradeoffs that go into determining minimum costs.
It is a peculiarity of cryonics that the person purchasing the service has never before been able to see the itemized bill. I think it is very important that both Suspension Members and prospective members see the bill, that they understand exactly what they are getting and why we charge what we do. Such disclosure not only builds confidence in and loyalty to Alcor in members and prospective members, but also it engenders helpful feedback from a broad cross-section of people, feedback that may prove very valuable in terms of helping us contain our costs and/or structure our program in ways most suited to our members needs.
When Steve Bridge and I wrote “The High Cost of Cryonics” in 1981, the recommended minimum for cryonic suspension with Alcor was $60,000 for whole body and $25,000 for neurosuspension. The rates were raised to $100,000 for whole body and $35,000 for neurosuspension in 1982, where they have remained until now .
At that time, we budgeted about $20,000 for preparation of the patient, $80,000 for long-term whole-body care, and $15,000 for long-term neuro care. In practice we often did considerably better than this, since we charged no Or very little labor to each case and basically billed supplies at cost, with virtually no mark-up to cover administration, stocking, spoilage, and Other associated costs of doing business. Thus, the typical charge for performing a neurosuspension (i.e., up-front costs, including perfusion and cooling to liquid nitrogen temperature) was in the $6,000 to $7,000 range, while for whole body patients it was in the $10,000 to $12,000 range; well within budget.
This rate of charge was both acceptable and desirable, given our size and needs. The Patient Care Fund was small, there were several unfunded patients for whom we had accepted responsibility, and we had a ready pool of volunteers to draw on. Since we were doing only one case every year or two, we were able to accumulate disposable supplies at a fraction of their new purchase cost. We kept our eye out for “remaindered” purchases, and frequently took advantage of “expiration sales,” where medical products would be deeply discounted because they were about to expire and thus could not be be sold to the mainstream medical community.
We were also able to purchase used equipment at a tiny fraction of the new purchase price. To some extent we are still able to do this, but we have been forced to become far more careful about the situations where we can safely deploy some of this equipment, due to reliability problems.
Over the past several years, Alcor’s suspension case load has begun to rise sharply. We are now doing an average of four cases a year, and recently we did three cases in a period of a little more than a month. In addition to completed suspensions, we are dealing with far more “last minute” cases — terminally ill people — than we have at any time in the past. Not all of these people make it through to suspension, but they nevertheless greatly increase the workload.
Another major change since 1982 is that people expect more of us. Our members expect more and the families of non-members who we place into suspension also expect more. We know from contacts with our members and our experience with recent suspensions that a much higher level of service is expected now than was a decade ago. Our members know from reading suspension case histories in the magazine that beginning the suspension procedure within two to six minutes of the pronouncement of legal death is not just desirable, it is also now possible. There is thus a growing expectation that this level of service will be available to every member.
From the suspension team’s standpoint, there can be no doubt that offering a high level of service and starting suspension promptly yields superior results. Tissue enzyme levels, organ viability, and the general response of the patient to cryoprotective perfusion are all tightly lock- stepped with the quality of post-legal-death support the patient received. Thus, there is great incentive to do the best job possible and to minimize injury every step of the way.
There is no comparison between the patient who rolls in the door clotted, having been simply packed in ice after cardiac arrest and air shipped hours later, and the patient who was promptly resuscitated, medicated, and treated with Viaspan blood washout in the field. The former patient perfuses (circulate) poorly, has large unperfused areas, experiences massive edema (swelling), and demonstrates evidence of serious injury on every level during perfusion. By contrast, the patient treated promptly with the best transport protocol we can offer has no clotting, perfuses well, reaches the desired level of cryoprotection, and has viable organs (by current criteria!) when suspension begins.
The Situation Today
It has taken us many years and much effort to develop such a transport system. It has cost an enormous amount in both time and money in research, equipment, and training. Added improvements during cryoprotective perfusion have also raised the cost, although not nearly as much as providing in-field transport of the patient in a way that minimizes ischemic injury.
Also, the days of an all-volunteer staff are long gone. People cannot be asked to take off work without pay three or four or more times a year, often for several days at a stretch. For over five years Alcor has had a full-time administrative staff, and we are now approaching the point where we will be in need of a full time suspension staff. Indeed, a big part of the reason this magazine is late in reaching you is that the administrative staff was diverted to doing three suspensions and handling the large volume of fallout work associated with them, instead of putting out Cryonics.
This shift, from unpaid suspension team volunteers to a core of full-time paid staff with a volunteer component, will be a difficult one. It will also be costly and it will not happen all at once. The transition period will have to be bridged with careful planning and heavy reliance on a core of initially underpaid staff and unpaid volunteers. It is my belief that volunteers will, for a long time to come, be a significant part of our operation and an important factor in containing costs (look at both profit and nonprofit hospitals for a similar model; both rely to a significant extent on volunteer labor to contain costs).
Another factor is inflation. The cost of living — as measured by the Consumer Price Index (CPI) — has risen 36% since December of 1982. The medical costs fraction of the CPI has risen even more — a whopping 59% — since 1982 (Source: Consumer Price Index Detailed Report, April 1990, U.S. Department of Labor, Bureau of Labor Statistics). These factors also (and inherently) touch the cost of cryonics. A direct result of this is the letter copied on the previous page, announcing a substantial increase in the cost of LN2. [This price increase was received after this article was written, and it and its effects are omitted in this article. — Eds.]
Also, we are “growing up.” While we are far from Humana Hospitals, we are now continually, vigorously, and often confrontationally in both the public and the governmental eye. We are being held to a higher standard than ever before. Because what we do involves many of the same risks to the community that medicine does, we must have a medical director and be regulated to protect the public health from infectious disease. Because we are dealing with a broader cross-section of people, both members and non- members, we must be more reliable and more careful. Gone are the days when we knew each and every Suspension Member intimately. We are now faced with a (comparatively) rapidly growing population of members who are more heterogeneous and who expect more of us: more professionalism, more technical sophistication, etc. We are, in short, becoming more like any other medium- to large-size organization, and thus somewhat less like a family. This, inevitably, is one of the prices to be paid for growth and success.
Ultimately, growth will help us to contain our costs. In some areas it already has. Storage costs for whole body patients have declined by nearly 50 percent, and the same will likely happen soon for neuropatients, solely as a result of the economies of scale associated with growth. However, it is important to note that it will be a while, perhaps a decade or longer at current rates of growth, before we start to experience economies of scale in the transport and perfusion parts of the procedure.
A Few Words About The Numbers
Accompanying this article are the current Alcor charges for both whole body suspension and neurosuspension. Just about every item that we have been able to identify that goes into placing a patient in suspension has been listed — and priced.
There are a number of caveats about this billing. First of all, to my knowledge it is a “first.” We have never seen anything like this from any other cryonics organization. It represents a real — albeit very preliminary — attempt to comprehensively call out the costs. This was not an easy task. We knew that we were losing money from the Operating Fund on suspensions because we were not “charging” the Suspension Fund enough, but we did not know the details of why. Until we identified what our expenditures were, we had no way of accurately billing the patient for the charges.
So, the first caveat is that this billing is preliminary. You can expect that we’ve missed some important elements. Also, be advised that we may have made some unrealistic assumptions.
One of those assumptions is the very low rate of “mark-up” on equipment use and supplies: 20 percent. We have kept this markup so low (40 percent is the usual) because we are still in the process of determining what our real costs are in these areas. We simply don’t have enough experience to know what our administrative overhead, re-stocking charges, spoilage, etc., are adding to the basic cost of the supplies we use. We also do not yet have an accurate feel for future costs of professional servicing of equipment and sophisticated instrumentation (although we are quickly getting such an idea, and it is not encouraging!). That we need such servicing is now an accepted fact here; we have one or more consultants/ repairmen in the building dealing with one or more equipment problems at least twice a month.
The second caveat is that the labor figures quoted in the billing are unrealistically (some would say ridiculously) low. The rate at which most labor is billed is $15.00 per hour. Exceptions to this are the $2,000 fee to our physician, who comes from San Diego, two hours away, day or night, and stays, usually for 24 hours straight (a real bargain at $2K), and our perfusionist/surgeon, who averages $20.00 per hour for his services.
These labor charges are not realistic, and would probably be at least twice this if we were paying anything approaching “market rate.” Consider that a licensed Registered Nurse obtained through a Nursing Registry will cost about $40.00 an hour. A skilled surgical nurse would likely cost more. We intend to get our Transport Training course back on track and get more volunteers trained so that we can hold down our labor costs. Additionally, the growth in membership has resulted in the appearance of more skilled volunteers willing to give of their time, and this may further hold down costs. But there are no guarantees, and it may well be that rising labor costs will be a major factor in increasing suspension costs over the next few years.
Determining Safety Reserves For Long-Term Care
When we first set the suspension rate minimums, we reasoned as follows: start with the capital required to generate sufficient interest to provide the marginal cost of caring for the patient, multiply that number by four to cover unforeseen and unknown costs (such as the cost of reanimation), and then add that amount to the anticipated suspension preparation costs (transport, perfusion, cooling, etc.).
Selecting a factor of four by which to multiply the marginal capital amount was somewhat arbitrary. Clearly some additional money held in trust is needed to provide for contingent costs such as moving the patients, moving Patient Care Fund (PCF) money overseas in the event of inflation, and covering the costs of revival. In 1985, the Alcor Board of Directors considered the matter of reserves and adopted a less demanding requirement than the 4x previously used. To generate the necessary funding through impending interest on capital, we implemented a Patient Care Fund Policy that set the minimally acceptable working capital base at 50 times the annual projected patient care expenses (or, 2x the amount of principal required to generate the marginal costs of patient storage). This is because the historical cost of money — deducting for inflation — is 2 to 3 percent (any interest that we get beyond that just covers risk factors). As a safety factor, the long term care fund which we require as a minimum should be double (100x our yearly storage costs).
The doubling allows for uncertain and contingent costs such as the need to relocate, legal problems, etc. Consider that after 100 years of interest on a whole body patient’s reserve of $83,464, the fund would only be $338,017 (in constant dollars). Setting the minimums to allow for interest to accumulate at equal to the marginal cost of yearly storage seemed the least that should be done to provide for unknown contingencies.
There is also the 10 percent rule, wherein 10 percent of all incoming revenue is diverted to the PCF. This was put in place to help defray the cost of revival and to guard against untoward possibilities during the long- time storage period we are likely to confront.
So where does all of this leave us? What does each element of the program cost and what are the tradeoffs? Should Alcor restructure its fee schedule to include at least a bare bones budget for Remote Standby, since most members seem not just to want but to expect this service? How do we soften or eliminate the impact of cost increases on existing members who may not be able to purchase added insurance or otherwise generate the capital? These are questions I’ll try to deal with. None of the questions, not even the “simple” ones that deal with determining realistic marginal costs, are easy to answer.
The Problem of Standby
The bare bones cost of suspension, which includes eight hours of local standby (even though Alcor is not obligated to provide any standby), perfusion, and cooling to liquid nitrogen temperature, checks in at $27,469.67 for whole body patients and $18,928.76 for neuropatients. The operational words here are bare bones. Historically, this is the way that we have figured suspension minimums. If you look at your suspension contract (“Cryonic Suspension Agreement”), you will note that the base figures quoted in it DO NOT include remote or local standby of any kind. Standby is extra.
The problem is, none of us understood just how much extra until Alcor started doing standbys. Alcor has done four standbys recently: three remote and one local. The average cost of a Remote Standby was about $10,000, and the average cost of a local one about $2,000. Obviously, looking at the basic rate of charge for Transport and Cryoprotective Perfusion, we do not have any surplus to address these kinds of costs within the framework of our current suspension funding minimums. Indeed, as it stands now, our suspension minimums are too low to cover even the basic costs of perfusion, freezing, and storage. Thus, every time we carry out a suspension, the Operating Fund in effect makes up the shortfall. If members want this standby as part of the package, they are going to have to pay for it. This may not be easy or even possible in some circumstances.
A brand new cost to Suspension Members is the cost of round-the-clock nursing care in a home or hospice setting. It is becoming increasingly difficult to die in a hospital in these days of medical cost containment. And in most cases it is by no means easy to get hospitals to cooperate — or even refrain from interfering with — cryonics personnel. Thus, an increasing number of people are dying in a “home hospice” setting, attended by relatives and one or more hospice nurses who visit the patient regularly and are on-call to come and pronounce legal death once it occurs. Unfortunately, such hospice nurses will usually not be available to sit with the patient round-the-clock and then pronounce legal death so that suspension can start right away. This means that registry nursing staff have to be brought in to provide such standby, often at tremendous cost.
It is also very important to point out that the charges given in this billing for such terminal nursing care and standby, both remote and local, are actually “middle of the road,” and may in fact be low. Consider the case of Arlene Fried, an Alcor member placed into suspension in June of this year. A team of three people was dispatched to standby, due to what appeared to be her imminent legal death. But Arlene did not deanimate as expected; rather, she hung on for ten more days. Six days before her legal death, she began developing cardiac irregularities and a decreased level of consciousness that was felt by those attending to put her at an increased risk of sudden death.
An attempt was made to get round-the-clock nursing staff at a cost of $37.50 per hour (market rate), so that someone duly authorized by the State of California would be available to pronounce legal death, allowing the suspension to start without the 20 to 40 minute delay that would have occurred while the on-call hospice nurse drove over to pronounce legal death. Fortunately for Arlene and her daughter and son-in-law, Fred and Linda Chamberlain, nursing personnel were not obtainable for three more days, or the bill for her round-the-clock nursing care would have been $6,000 instead of $3,000!
Some people will be able to avoid the high cost of round-the-clock RNs by being fortunate enough (or unfortunate enough, depending upon your point of view) to experience legal death in a hospital or nursing home. This still leaves the problem of basic Remote Standby charges, which are in the vicinity of $360 per day for a team of three people, plus other possible charges for food, lodging, and local transportation of up to $150 per day, and a possible air transport bill for the team and equipment of up to $2800. Remote Standby can get very expensive very quickly.
A number of solutions to the problem of Remote Standby have been put forth. Providing extra funding in the form of life insurance is a good place to start, since if Alcor: a) knows the money is there to pay for it, and; b) is confident that you are imminently terminal, then we are far more likely to respond by deploying a team and standing by.
The problem of remote standby is a lot stickier in cases where we are not sure that you are going to experience cardiac arrest soon. People — even so-called terminally ill or dying people — often surprise everyone and live longer than expected. In Alcor’s own experience this has happened every time we have done standby. Sometimes people who are terminal and who are not expected to make it through an episode of acute illness rally and go on to live for a few more weeks or even months. A mistake in judgment about when to come in such a situation (either too soon or too late) would be a disaster.
Alternately, we could offer a Remote Standby Option (as opposed to Remote Standby Insurance) as part of our dues package. Members wishing to purchase this option would pay increased dues and would be guaranteed a specified level of Remote Standby providing that certain objective medical criteria were met. They would also be required to cover part of the cost of Standby (perhaps 20%) out of pocket either via their suspension fund (if they were suspended) or via their personal funds, if they recovered, and there would be a waiting period of 1 to 2 years from the time of application until the time coverage was issued. These latter two requirements would prevent abuse of the system by people who would wait until they were terminally ill to purchase standby coverage or who would call out standbys every time they were having a wart removed.
Unfortunately, defining objective medical criteria to predict when someone is likely to deanimate is not easy. This is why physicians are so notoriously cagey about predicting when someone is going to die. Nevertheless, we — myself and others in Alcor — are giving some thought to this, with the goal in mind of coming up with a fairly comprehensive set of guidelines which would allow such a program to be implemented.
As for neurosuspension patients, our minimums are currently set at $1016 more than would be required both to pay up-front costs and to generate two times the annual expenses for storage in interest. Thus, it might seem reasonable to leave the required level of funding at $35,000 for neurosuspension.
In the case of whole-body patients the situation is considerably worse, with the difference between the desired levels of funding for both up-front and long-term care being $11,000. Thus, whole body minimum funding levels would have to be increased to $111,000 to satisfy current PCF requirements.
I should also note that in 1982, when the current minimums were set, a generous allowance was made for anticipated increases in the cost of perfusion and cooling to liquid nitrogen temperature. Such increases were anticipated to be in the areas of labor, inflation, and technological upgrades. Providing such a “safety factor” has proved very wise, allowing us to do as well as we have. The new suspension funding minimums proposed above do not reflect such an allowance for future increases in the cost of perfusion and cooling. It seems likely that labor costs will continue to increase disproportionately and that inflation also will continue to be a significant cause of cost increase. Thus, it would be prudent to consider providing for future cost increases when examining a potential increase in suspension funding minimums.
This safety factor was also put in place because it is an administrative catastrophe to have members adjust their insurance upwards every time costs rise. It is also not easy on the member to purchase more insurance in 1K or even 2K or 3K increments. Since the storage safety reserves are so modest and the costs of revival and other contingent expenses almost unknown, such a reserve for anticipated expenses seemed reasonable. I would recommend that if suspension minimums are adjusted now, a similar “fudge factor” to cover anticipated cost increases should be factored in. In 1982, the fudge factor for preparation charges was set by adding 1/3rd of the current marginal preparation costs to the total up- front charge. Thus, if the same is done for our current up-front marginal charge, we would need to raise the suspension minimums to $120,000 for whole body and $40,000 for neurosuspension.
Paying For Standby
Failing to consider the issue of standby, both local and remote, may be a very serious error. We may be doing a real disservice to ourselves by not increasing our minimums to accommodate what we know are likely to be realistic charges for this service. This is a difficult decision to make, since each time we raise the minimums we know that some people, particularly the elderly and the already terminally ill, will be excluded.
The addition of standby charges with a reasonable margin for “error” would result in a figure of $15,000 being added to the base cost for both whole-body suspension and neurosuspension. This would yield adjusted minimums of $55,000 for neurosuspension and $155,000 for whole body suspension.
These are substantial increases in the minimums. Worse still, about 40 percent of our members are unlikely to need remote standby, since they live in the greater Los Angeles area, although they are likely to need at least some local standby time.
In my opinion, the best solution to this problem would be to offer “Standby Insurance,” wherein those who want and need the service can purchase it or not as they choose. Additionally, the risks of needing the service could be assessed on a case-by-case basis, with rates adjusted accordingly, thus eliminating adverse selection and allowing the service to be offered without a “weeding out” time delay. Offering insurance is not an easy thing to do. Insurance is a moderately regulated industry and there are many regulatory requirements which we would have to meet. I believe it of critical importance that as soon as possible we evaluate these regulatory requirements and determine if we can meet them, or structure a standby program which would not use an insurance-based mechanism.
Clearly, as a minimum we need to begin returning to the operating fund the real costs of doing cryonic suspensions, including reasonable labor charges. We also need to pay careful attention to cost containment and to be very thoughtful about the cost/benefit ratio of costly new technology.
Grandfathering and the 10% Rule
Another major area that needs to be addressed is the issue of “grandfathering-in” existing members at the current rate structure. As the numbers show, this could rapidly become a costly proposition, particularly if costs rise not only due to technological improvements, but also to increases in the CPI, which also affect our operations. Keep in mind that the new funding minimums tendered in this article do not in any way take into account the costs of providing suspension at a loss to long-time members.
There has been some discussion lately of modifying or abandoning altogether Alcor’s policy of diverting 10% of incoming revenue to the Patient Care Fund. The desire to do this seems to be motivated by a (healthy) growing awareness of the shortfall in operating capital Alcor will confront when income from the Jones estate drops off sharply over the course of the next few years.
I believe that we should give careful consideration to the contingent costs of grandfathering before we abandon the 10% rule, in view of these numbers and the likely consequence to existing members (some of whom may well be those of us signed up now) some years downstream. It is vitally important that we try to establish how much we expect charges to rise in the coming years, based on past experience. Having a set of upper and lower boundaries to guide us will help us to plan intelligently how large a sinking fund we need to cover the liability of grandfathered members. Until this is done, I strongly urge the Board to defer any modification or elimination of the 10% Rule. The cost of grandfathering in existing members may be very high, and unless we plan to drop suspension coverage for long-time members who find themselves excluded by rising costs, the problem will only get worse. A prudent savings plan into the PCF — such as the 10% Rule — may well be the difference between life and death for such members.
A word also needs to be said about what has been left out of this analysis: the issue of training, particularly for Coordinators. This is a costly proposition that we need to address either by shifting more of this cost to local groups or by implementing a Remote Standby Program featuring increased dues, some of which can be diverted to pay for training, equipment in the field, and the general high level of readiness and redundancy in emergency response that we currently maintain.
There are no easy answers. The Alcor Board will not make these decisions lightly. Input from members would be much appreciated.
Finally, I need to emphasize the need for patience and understanding on everyone’s part. These are rough transition times for us. The more help that we get from you, our members, in terms of volunteer hours and volunteer dollars, the more we’ll be able to hold down costs, and the more we’ll be able to offer